As a healthcare manager, daily management tasks include financial management. Financial management includes items such as labor cost, equipment cost, and a budget that controls the operations. Proper operations requires planning and control. The budget is created using the basic financial information and accounting principles that an organization uses in its monthly, quarterly, and annual financial reports.

After learning the basics of financial statements, it is very important for a healthcare manager to understand the basic five areas of performance that set the financial plan for the organization. Define and provide an example of what the following mean:

• Short-term solvency
• Activity
• Financial leverage
• Profitability
• Value

Define the following terms, and explain why they are important in a healthcare organization:

• Current ratio
• Total asset turnover
• Debt ratio
• Profit margins